Consumer Credit / Credit Cards
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By woodymw
June 4, 2004

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I've been a Fool member for a while, and actively lurked in several, several places. I've even actively posted in some. This has been an extremely interesting board to watch � with some incredibly good ideas. I've determined, however, that I want to tell my financial story and how the Fool has changed the way I go about things.

In February of 2002, my credit card debt hit an all-time high of $9,957.36 (a number I'll never forget) spread out over six accounts. Though this is quite small compared to some success stories I've seen, it was quite a lot for a still-in-graduate-school waiter. Of the six accounts, at least four were over the limit, and at least five (and probably all six) were past due. I have a business degree, so I know how to do all of the math � and it scared me to death when I finally got the guts up to sit down and crunch the numbers. That original ten grand was charging me a weighted average interest rate of 22%. Roughly a third of the principal balance had been accrued in late-fees, over-limit fees, and interest charges. Roughly another third was, as I like to put it, living a lifestyle I couldn't afford. I was engaged at the time (this fell through, thank goodness � and largely due to money and differing expectations for it) � and WE were living a lifestyle we couldn't afford. It was unbelievable how fast it added up.

When I went two consecutive months without answering the phone (nod your head if you've been there), I finally got fed up. Graduate school (law school � very demanding of both time and money) had to go � there was no way to reconcile my finances under those circumstances. So, I went to work, initially waiting tables full time. The relationship fell apart, based largely on money problems and the underlying issues such problems reveal, and I moved away from a bad situation.

There were some positives. My car was paid for, and had been for some time. When I moved back to the "world," I was able to live with my parents for about six months (paying rent, although relatively small, the whole time) while I got back on my feet. I made a difficult decision, and asked for help. I hooked up with a credit counseling company whose name I got right here on the Fool � Debt Management Credit Counseling out of Boca Raton, Florida. They negotiated with my creditors, brought all of my accounts current and lowered the interest rates, and began servicing those accounts for me. The new weighted average interest rate became 8.5%. I began a plan that would have my CC debt paid off by May of 2005.

And then I buckled down to work. I got a "real" job in June of 2002, and kept waiting tables at night. In December of 2002, I got the guts up to check my credit report and score. My score was under 450. Under 450. My Lord, under 450. I was, among other things, ashamed. But....I looked, was still less than a year since my last late payment....AND, I found a bad debt entered by a bank that was still showing as unpaid � when I had paid it months before. I objected, and it was removed from my report. This is something I would not have even considered without the Fool.

Then, a setback. My car (1993 Chevrolet Corsica, 160K miles, RIP) finally died. I had driven it for 8 years, and the thing gave out on me. I upgraded slightly, and financed $3500 for 18 months for a '93 Dodge Dakota that was MUCH more reliable.

In the meantime, I was making extra payments on my CC debt. $100 here, $50 there, a big month and $800 there � and the debt started dramatically falling. The initial program with DMCC split the amount I paid in over all six accounts by agreement. Once the first account paid off, however, I was given full discretion over those funds � and I started snowballing. Highest interest accounts first. One at a time, they began to fall. And, my average interest rate was falling, too. The point was, I was watching. DMCC missed payment to a creditor one month � because I was watching, I caught it immediately, and took care of it. Everybody was happy � and I knew I was finally getting somewhere.

Last night, I sat down and went through my bills/finances. Things have changed drastically. The job I started in June of 2002 has turned into a career path � they promoted me to supervisor of my department, and have paid for me to obtain professional licenses in two states. I began contributing to my company's 401(k) about a year ago (4% at first, up to 8% now), and every time I see the balance I just shake my head � three years ago that seemed like so much money. I'm still working two jobs, but I have a goal � pay off a four year plan in less than three years.

The reason I'm telling this story is � I went under $2000 in the CCs this month. If I don't pay anything more than my monthly minimums through DMCC, the two accounts left will be paid off in December. I have two payments left on my truck, and then it is all mine. My credit score, as of two weeks ago, was 725. In less than three years, I will have paid off $10K in credit card debt, bought a $3500 truck, built a $1500 balance in my 401(k), and raised my credit score nearly 300 (yes, really, 300) points.

They aren't paid off yet, but I can already feel it � I'm free. I can go back to school and get that graduate degree (an MBA this time). I can build up that emergency fund and quit worrying about the next tire to blow out. I can work ONE job at a time, for the first time in three years.

And, I can say a heartfelt "Thank You" to those at the Motley Fool who helped without having the first clue who I was.

So, Thank You.


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